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Value Creation Case Studies

Supporting an exceptional brand and accomplished entrepreneurs in capitalizing on digital media growth.

About Beats and the Transaction
The Carlyle Group acquired a minority stake in Beats Electronics LLC in October 2013 and exited the investment through a sale to Apple, Inc. in July 2014.

Beats is a creator and marketer of premium headphones, speakers and audio accessories that deliver high quality sound with an appealing design aesthetic. Dr. Dre and Jimmy Iovine founded Beats in 2006 to address the degradation in audio fidelity that resulted from music’s transition to portable and digital formats, while providing improved sound quality and an attractive product design. The Beats team’s significant sound and music expertise combined with their strong capability in audio engineering enables the Company to develop revolutionary products that deliver sound the way the artists intended. Since its founding, Beats has redefined the headphone industry, creating the market for premium, stylish headphones and audio accessories. At the time of our exit, the Company distributed its products through nearly 50,000 retail stores globally, including through key retail partners, its own retail store in New York and its website, and had captured the #1 market position in the U.S., EMEA, Asia and Latin America. In addition, the Company earns royalties through third party licensing partnerships.

Key Value Creation Metrics

Enhanced the management team by recruiting Chief Operating and Chief Financial officers

Utilized the One Carlyle global network to help accelerate the Company’s international expansion, particularly in Asia

Prepared the Company for a sale to Apple

During Carlyle’s nine-month ownership period, the Company increased LTM Revenue by 34%

Investing Behind Worldwide Leader in Headphones with Powerful Brand and Best-In-Class Marketing
Carlyle invested behind talented entrepreneurs who revolutionized the music and headphone industries, and who have tremendous audio authority and authenticity for consumers. The Beats brand is powerful, highly differentiated and resonates with consumers around the world. The brand is bolstered by innovative, creative and best-in-class marketing with unique product and packaging design. The combination of a great brand, unique and high quality product and excellent marketing enabled Beats to become a world leader in headphones with more than 60% market share in North America alone.

Strengthening Management for the Next Stage of Growth
To prepare Beats for the next stage of its growth, the founders and Carlyle set about further professionalizing the organization by recruiting new Chief Operating and Chief Financial officers. With the new team, the Company significantly improved operations, including streamlining its manufacturing partner base, establishing and enforcing a better global returns policy, capturing sourcing cost-downs, and optimizing transportation and distribution expenses (including through the Company’s partnership with Carlyle’s leveraged purchasing team).

How Carlyle Creates Value

Deep industry expertise. Global scale and presence. Extensive network of Operating Executives. And a wealth of investment portfolio data; we call it The Carlyle Edge. These are the four pillars of Carlyle’s value creation model. By leveraging these core capabilities and resources—Carlyle has established a 30-year overall track record of investing in companies, working to make them better and serving our investors' needs.

Carlyle believes these selected case studies should be considered as a reflection of Carlyle’s investment process, and references to these particular portfolio companies should not be considered a recommendation of any particular security, investment, or portfolio company. The information provided about these portfolio companies is intended to be illustrative, and is not intended to be used as an indication of the current or future performance of Carlyle’s portfolio companies. The investments described in the selected case studies were not made by any single fund or other product and do not represent all of the investments purchased or sold by any fund or other product. The information provided in these case studies is for informational purposes only and may not be relied on in any manner as advice or as an offer to sell or a solicitation of an offer to buy interests in any fund or other product sponsored or managed by Carlyle or its affiliates. Any such offer or solicitation shall only be made pursuant to a final confidential private placement memorandum, which will be furnished to qualified investors on a confidential basis at their request.